Chapter 5 - Legal Issues for Investors

When you invest in a trust deed there are certain legal issues that you need to consider. Regardless if you secure your trust deed investment through a single lender (whole) or by more than one lender (fractionalized), you will still need to follow certain rules and regulations as stated by real estate law.

Real Estate Law


The Real Estate Law includes what is commonly referred to as the multi-lender law. This multi-lender law has certain restrictions which it can impose on the investor. Some of these laws include, but are not limited to the following:

? The investor must have their loan serviced by a mortgage loan broker (MLB) and have a written agreement. Furthermore, the investor and the MLB need to arrange for a third party to take part in loan servicing. The third party should be a qualified, licensed real estate broker.

? A loan can have no more than 10 note holders or lenders.

? The investor is not permitted to invest more than 10% of their annual income or net worth

? Based on the type of property that is considered collateral, defined loan-to-value ratios are not to be exceeded

? Only under limited circumstances is the MLB allowed to self-deal.

? The investors loan is not permitted to be indirectly secured though any other deed of trust or promissory note, and is only secured directly through the property.


TILA - Section 32


Aside from the Real Estate Law, you may find that your loan documents will feature another legal document known as the federal Truth-in-Lending Act (TILA). The TILA was amended in 1994 and was created in respect to loans that are secured by a borrowers principal property. The rules of the TILA affect all mortgage transactions that are described as having fees or rates that are above a specific amount or percentage. Such mortgage transactions are known as high rate/high fee or Section 32 loans.

A loan that is considered to be high rate is one where the appraisal exceeds ten points on the Treasury Security yield that has similar development. A high fee loan, on the other hand, is one where the total fees and points are greater than 8% of the total loan amount. If you have any questions concerning the TILA, you can contact the Federal Trade Commission, as the TILA regulations are enforced by them.

As you can see there are many legal issues for investors to consider before they invest in a deed of trust. Make sure you understand all legalities concerning trust deeds before you make your investment.

Are Trust Deeds A Liability Or Equity

A title company will open a standard insured loan transaction, and will research the property.

It requires that the borrower usually make regular monthly payments of interest and principal throughout the period of the loan. Thus, escrow closes when every condition of the escrow instructions have been met or waived, the documents have been recorded, and the funds have been released. Know your borrowers financial status and their credit worthiness. 5% (Note: This is calculated by using any handheld calculator.

Regardless if you secure your trust deed investment through a single lender (whole) or by more than one lender (fractionalized), you will still need to follow certain rules and regulations as stated by real estate law.
Such documentation can include, but is not limited to following: _ Certificate of occupancy _ Well report _ Proof of purchase cost _ Notice of completion _ Closing statements _ Roof reports _ Toxic reports _ Sign off of final permit card _ Etc. Another important difference is that title insurance is a single premium product. This means that the buyer pays a one-time only premium for the lenders benefit on the day the policy is issued. Are their Precautions I should take? _ Only two parties are involved in a mortgage document - the lender and the borrower. When it comes to bankruptcy, the investor will require the assistance of an attorney to appear in court, in order to request that relief be granted from the automatic stay.

Coppercrest Funding provides investors with many unique opportunities to invest in trust deeds.
Regardless of the term used, the closing of escrow is when all of the final papers are signed, and the closing officer is prepared to record the deed to the property, and the sale goes to the seller. (Note: Keep in mind that each state may have their own process of foreclosure, so the following information may not apply to your area)1. Furthermore, contracts are reviewed to make certain that borrowed funds are sufficient to complete the project. Before a loan is granted, a Coppercrest Funding officer will perform a personal inspection of all subject properties. While some properties may look similar, you need to understand that no two pieces of land are the same.